In a dramatic twist in Silicon Valley’s intensifying AI arms race, Cognition Labs—the startup behind the AI software engineer Devin—has acquired the remaining assets of Windsurf, just days after Google scooped up the company’s CEO and key researchers in a separate $2.4 billion licensing and talent deal.
Cognition announced Monday that it is taking over Windsurf’s intellectual property, product stack, enterprise contracts, branding rights, and remaining staff. While financial terms were not disclosed, the acquisition effectively closes the loop on a startup that, only months ago, was in talks to be acquired by OpenAI at a rumored $3 billion valuation.
The dramatic split marks the latest maneuver in what has become a high-stakes tug-of-war for artificial intelligence talent and code-generation infrastructure, particularly as tech giants rush to build tools that automate software engineering tasks at scale. Windsurf, a rising star in the AI coding space, had built a full-stack IDE powered by proprietary AI models designed to write, test, and ship code with minimal human oversight.
OpenAI’s talks to acquire Windsurf fell apart earlier this year, reportedly due to complications arising from Microsoft’s close partnership with the lab. The collapse of the deal opened the door for Google, which last Friday announced it had hired Windsurf co-founder and CEO Varun Mohan, along with chief scientist Douglas Chen and several other senior developers. In exchange, Google agreed to pay a massive $2.4 billion fee to license Windsurf’s code-generation engine and compensate its new hires.
But Google’s deal did not cover the full company. That left Windsurf’s remaining team, product infrastructure, and enterprise customer base—reportedly including more than 350 paying clients and $80 million in recurring revenue—on the table. Cognition’s acquisition fills that gap.
Cognition CEO Scott Wu, in a memo to staff, described the move as a unifying moment for both companies, saying all incoming Windsurf employees will be treated equally with existing staff. The memo emphasized financial participation for the acquired team, waived vesting cliffs, and fully accelerated equity as part of the deal—an effort to ensure morale and retention after a turbulent few months.
The acquisition gives Cognition access to an industrial-grade IDE and deep integration tools that will now be woven into Devin, the company’s autonomous software engineer. It positions Cognition to push further into the “agentic coding” frontier—a new class of AI tools that don’t just assist developers but actually write, debug, and submit code autonomously. The company aims to consolidate both code-generation and deployment into a single AI-powered environment that could fundamentally shift the economics of software development.
For Google, the move signals a renewed commitment to its Gemini AI suite, which is expected to gain significant new capabilities from the Windsurf talent and licensing. The integration of Windsurf’s backend models could help Google catch up in the rapidly evolving AI developer tools market, where Microsoft-backed GitHub Copilot and Amazon’s CodeWhisperer currently hold significant traction.
The Windsurf story also highlights the new dynamics of startup acquisitions in the AI era. Founders and key engineers are becoming more valuable than the startups themselves, often resulting in “fractioned” deals where companies are effectively split—talent going to one firm, technology to another. It also underscores how the race to own AI coding infrastructure has moved from startup playgrounds to billion-dollar boardroom decisions.
What started as a promising startup with strong backing from Peter Thiel’s Founders Fund, Greenoaks, and Kleiner Perkins, has now become the centerpiece of a broader reshuffling in the AI coding space. Cognition, having now inherited Windsurf’s core assets, is expected to unveil the first integrated version of Devin and Windsurf’s IDE later this year. Google, meanwhile, is likely to showcase Windsurf-powered Gemini enhancements at its upcoming developer conference.
The deal underlines the emerging reality of the AI arms race: the battle is no longer just about who builds the best model, but who controls the full ecosystem—from code-writing agents to the infrastructure that supports them. And in this new paradigm, even a fractured acquisition can be a strategic masterstroke.
